SEBI is pressing further with its agenda of segregating advice and execution. This became more evident when the minutes of its latest meeting held on September 23, 2016 were released.
Here are key points discussed in the SEBI meeting:
- SEBI is going to re-look at the exemption given to intermediaries from registration as Investment Adviser, especially mutual fund distributors. Till now, mutual fund distributors took shelter under the exemption that their advice is incidental to their primary activity of distribution business. Now, no more. The advice component is going to be moved to the Investment Advisers.
- SEBI is going to give 3 years time to mutual fund distributors to migrate as Investment Adviser and register themselves and comply with other requirements. SEBI is expected to issue clarifications.
- For corporates, SEBI is going to mandate segregation of investment activity through a separate subsidiary. Currently, some companies have established a separate department rather than a subsidiary for its investment advisory activities. While it was mandatory for the banks to have a separate subsidiary for advice, now it is going to be mandatory for other companies too. However, companies will also have a 3 year window to comply the same.
- Clarification is going to be issued for investment advice given through electronic media. In this world of internet, a lot of investment advice is given out on blogs and websites. SEBI is going to put greater control over this medium as well.
- Advertisement code has to be followed by investment advisers issuing advertisement. More clarity is awaited on this from SEBI.
- There will also be restriction on providing trading tips via bulk SMS, email etc. and offering schemes, competition, games etc to solicit business. This kind of activity is mostly followed by Stock Brokers and Investment Advisers providing stock advisory.
- As per SEBI, greater clarity is required to distinguish between the activities of the investment adviser and research analyst. I have come across a case where a company is in stock research and advisory. It sells it research recommendations electronically to public. The company has registered with SEBI as Research Analyst. But now, SEBI says it should also registered as Investment Adviser as it gives stock advisory. We have to wait and watch to see what clarity SEBI issues for the activities of investment adviser and research analyst.
- SEBI will also provide clarity on mode of acceptance of fees. Currently the regulations specify that the investment adviser should receive fees only from the client and not from any other source.
- To make the investors more aware of the services of investment adviser, requirement will be specified by SEBI for providing ‘Rights and Obligations’ document to the clients of investment adviser.
- SEBI will provide clarity on requirements for providing Online Investment Advisory Services and Use of Automated Tools. This will be applicable to companies which provide robo-advisory services.
SEBI is going to issue a consultation paper for amendments and clarifications to SEBI (Investment Advisers) Regulations, 2013. The consultation paper will be placed on SEBI website to receive public comments. Keep looking at this space for more.
Some good news!! SEBI has decided to grant permanent license to Investment Advisers and Research Analyst. However, SEBI will do on-site and off-site supervision and will require submission of documents on a continuous basis.
What do you think of SEBI’s moves? Let me know in the comments.
In case of queries, you can email me at kruti@cskruti.com.
Read more: How to get registered as Investment Adviser with SEBI?
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